Day one weakness not due to fundamentals

Trevor Greetham

5 January 2016

Market action on the first trading day of the year had very little to do with fundamentals. The Chinese stock market closed limit down on fears that institutions were about to unload holdings as the selling ban introduced last summer was due to expire this week. Today we see reports that the Chinese authorities will extend the ban and listed companies are apparently being “encouraged” to issue statements saying they’re willing to suspend sales. This isn’t developed market behaviour but it may limit unwarranted contagion to other stock markets. Meanwhile the oil markets worried about increased Saudi-Iranian tensions for less than a day before a sharp sell-off left West Texas Intermediate (WTI) below its opening level.

Source: Bloomberg as at 5 January 2016

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